DTN Early Word Opening Livestock

 
Cattle: Steady w/Wed Futures: 100-200 HR Live Equiv $142.25 -1.44*
Hogs: Steady-$1 HR Futures: 50-100 HR Lean Equiv $111.09 + .56**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

In a surprising display of midsummer strength, cash cattle bulls chased a moderate number of ready steers and heifers generally $2 higher on a live basis (i.e., $120). Interestingly, such cash strength flew in the face of both seasonal odds and struggling wholesale prices. Asking prices on the balance of show lists are priced around $122 in the South and $190 to $192 plus in the North. Live and feeder futures should open substantially higher Thursday thanks to follow-through buying and another aggressive round of short-covering.

Look for the cash hog trade to resume Thursday with bids steady to $1 higher. Despite decent processing margins, Saturday kill plans are expected to be 34,000 head. The week is currently forecast for just over 2.2 million head, roughly 4% above a year ago. Lean futures seem staged to open moderately higher, supported by solid fundamentals and spillover bullish from the cattle futures.

	BULL SIDE		BEAR SIDE
1)	Showing a surprising amount of hunger, cattle buyers moved with $2 higher live bids on a live basis to secure moderate numbers on Wednesday.	1)	Beef cutouts imploded Wednesday with the choice and select box closing off $2.55 and $1.78, respectively. Box offerings were described as "heavy."
2)	Inspired by higher feedlot sales while stoked by aggressive short-covering and technical buying, most live and feeder contracts surged to limit gains Wednesday.	2)	The Word Board increased its estimate of 2017 beef imports by 30 million lbs. and 2018 beef imports by 45 million lbs.
3)	Adjusting in the wake of the June Hogs & Pigs report, the World Board has lowered estimates of both 2017 (by 60 million pounds) and 2018 (by 175 million lbs.) pork production.	3)	For the week ending July 8, U.S. hatcheries set 226 million eggs in incubators, up 4% from a year ago. At the same time, chicks placed totaled 182 million chicks, up 2% from 2016.
4)	The pork carcass value closed moderately higher at midweek, supported by better demand for bellies, butts and picnics.	4)	For the week ending July 8, Iowa barrows and gilts averaged 278 lbs., 1.6 lbs. heavier than the previous week and .3 lbs. under 2016.

OTHER MARKET SENSITIVE NEWS

CATTLE:(hpj.com) -- On June 27 Kevin Kester, a fifth-generation California rancher and president-elect of the National Cattlemen's Beef Association -- the oldest and largest national association of cattlemen -- testified in support of the market access that the North American Free Trade Agreement has delivered for America's cattle producers, and warned against the re-adoption of failed policies that harmed the industry in the past.

"NCBA strongly supports NAFTA because the terms of NAFTA developed Canada and Mexico into two very important export markets for U.S. beef," Kester testified at a hearing hosted by the Office of the U.S. Trade Representative. "Quite frankly, it is difficult to improve upon duty-free, unlimited access to Canada and Mexico—so please do no harm and do not jeopardize our access."

Kester pointed out that Canada and Mexico have become two of the top five export markets for U.S. beef producers, accounting for approximately $1 billion each in annual sales. Kester also warned USTR's NAFTA negotiators to beware protectionist calls to resurrect failed policies of the past, such as mandatory country-of-origin labeling, or COOL.

"COOL was U.S. law for over six years and failed to deliver on its promises to build consumer confidence and add value for our producers," Kester pointed out. "Instead, COOL resulted in a long battle in the World Trade Organization with the United States facing the promise of $1 billion in retaliatory tariffs from Mexico and Canada unless COOL was repealed by Congress. Canada and Mexico still have the authority to retaliate against the United States if COOL is brought back into effect—and rest assured they will retaliate against us if necessary."

HOGS:(nationalhogfarmer.com) -- Pork bellies prices are on fire, scaling past all-time highs set during the porcine epidemic diarrhea virus year of 2014. Last Friday, fresh pork belly prices rose 4.5 cents, nearly doubling the cost of the wholesale pork carcass. Market participants and pork producers are enjoying the boost in prices, but remain optimistically cautious about strong prices.

Bacon is a rock star. No one can deny it. It is honestly a household staple. It makes everything taste better. Right?! However, bacon has taken on a whole new role in food establishments in recent years. Pork bellies are on menus from fast food chains to fine dining restaurants. Consumers are devouring handcrafted food items, and pork bellies play nicely into that scene. Chefs are getting creative.

Foodies are demanding more. And pork fits well into the scenario. So, why the fresh high prices for pork bellies? It goes back to the elementary lessons of supply and demand. According to market analysis, pork bellies' supply is tight. The latest Cold Storage report by the USDA shows stocks of frozen bellies at a record low. Basically, the bacon stash is depleted, and it is time to restock the freezers.

Like all commodity markets, swings in prices are going to happen. What goes up must come down. For now, hog producers and market participants are just enjoying the ride, but hanging on tight.

Nevertheless, just because pork bellies supplies are tight Thursday, it does not mean we are running out of bacon. Do not start that rumor. America's pig farmers are doing an excellent job of raising more pork this year, as pork production is anticipated to grow by 3-4%. So, no matter if you enjoy bacon the good old fashion way, chocolate-covered or on top for an ice cream sundae, just keep eating it-- America's pig farmers will make more.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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